As covered in more detail in a separate alert, the Illinois Supreme Court ruled in Kanerva v. Weems by a 6-1 margin that state-subsidized retiree health coverage premiums are subject to the pension protection clause of the Illinois Constitution. As a result, the Court held, such benefits may not be retroactively diminished or impaired by the legislature.

In 2012, the legislature passed the State Employee Group Insurance Act of 2012 (Public Act 97-695), which required current retirees to contribute towards the cost of their health coverage based on a formula. The Supreme Court remanded the case back to the trial court to determine whether the benefit reductions effected by Public Act 97-695 violate the pension protection clause of the Illinois Constitution.

As explained in our prior alert, it is unclear what impact the Kanerva decision will have on the impending legal challenge to Senate Bill 1, passed in December of 2013, which made various benefit reductions to public pensions, including for current pensioners.